SARB criticised for lack of monetary policy creativity beyond inflation targeting

Independent economist Dr Thabi Leoka has expressed concern about the government’s fiscal policies, emphasising its concentration on consumption rather than investment.

She claims the Reserve Bank has not been creative enough to explore monetary policy tools, other than inflation targeting, to encourage economic growth.

Speaking at the Bank’s Biennial Conference in Cape Town on Friday, Dr Leoka says, “What the SARB did during Covid, taping into the secondary market, is something that can be done a lot more regularly.  We are in an economic crisis of our own because there is no growth, so I think certain tools can be used outside of a global crisis.

“The SARB is often criticised for hiding behind regulations, and I am wondering if the SARB would be able to ease some of the regulation to make it easier to work with National Treasury. So I think there is room now post global crisis, this time being a pandemic, to actually think about monetary policy tools apart from the current one,” she explains.

Kganyago says the central bank is still worried about some components of inflation, despite its slowing trend: 

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Meanwhile Reserve Bank Governor Lesetja Kganyago has hit back at assertions that monetary policy and fiscal policy should be more coordinated.

Kganyago says asking the central bank’s monetary policy to be coordinated with government’s fiscal policy equates to asking the central bank to swim with crocodiles. In response to comments about bank’s lack of creativity in the use of monetary policy by the South African Reserve Bank, Kganyago gave Zimbabwe, Argentina and Turkey, where inflation has skyrocketed, as examples of what happens when central banks become creative with monetary policy.

Source: SABC News (